Paying Back Your Loan

How will I pay back the loan?
Repayments will be automatically deducted from your income through the tax system from the April after you complete or leave the course and your income is more than £21,000 a year.
• your monthly repayments will be based on your income, not what you borrowed
• you’ll only start making repayments when your income is more than £404 per week, £1,750 per
month or £21,000 per year
• you’ll only pay back 9% of any income above £21,000 a year, see the table below for examples
of what you’ll repay:

Income each year before tax Monthly salary Monthly repayment
Up to £21,000 £1,750 £0
£22,000 £1,833 £7
£25,000 £2,083 £30
£30,000 £2,500 £67
£35,000 £2,917 £105
£40,000 £3,333 £142

 

So, if you’re paid monthly and earn £2,500 before tax you would repay 9% of the difference between
what you earn and what the individual threshold is: £2,500 – £1,750 = £750 9% of £750 = £67.50 Your loan repayment would be £67 in that month. If your income drops or rises, for example if you
receive a bonus, your repayment amount will automatically change to reflect this.
Interest
How much interest will I be charged on the loan?
Some of the interest on your loan will be based on inflation (Retail Price Index (RPI)). The table below shows how interest is calculated.

  Interest rate
While you’re studying and until the April afteryou finish or leave your course Retail Price Index (RPI) plus 3%
If you finish or leave your course before April 2016 RPI plus 3% until the April after you leave your course then RPI
From April 2016 Interest will be based on your income. 
  • £21,000 or less – RPI
  • £21,001 to £41,000 – RPI plus up to 3%, depending on income
  • £41,000 and over – RPI plus 3%

What is RPI, and what happens if it changes?
The Retail Price Index, RPI, is a measure of UK inflation. It measures changes to the cost of living in the UK. The UK government uses the rate of RPI for many purposes, including setting the interest rate charged on student loan.

When will repayments start?
Repayments via the tax system will start from April 2016 and there’s no need to repay until then. You can make voluntary repayments direct to SLC at any time and before April 2016 in order to accrue less interest and pay off your loan more quickly. If you leave your course after April 2016 then repayments will start from the following April and when your income is more than £404 a week, £1,750 a month or £21,000 a year.

What happens if I have more than one student loan?
You’ll make a single repayment regardless of how many student loans you have, including HE and 24+ Advanced Learning Loans.

How do I repay the loan early?
Voluntary repayments can be paid to the Student Loans Company at any point. You don’t need to wait until your income is over £21,000. Any early repayment, either partial or full, will reduce the interest that will accrue. If you want impartial advice about repaying your loan or other debts you can contact the Money Advice Service at moneyadviceservice.org.uk

If I am undertaking an Apprenticeship and my employer makes me redundant, would I still be required to repay the loan?
Any apprentice who has been made redundant will be fully supported to find alternative employment and continue their programme by the National Apprenticeship Service. If this isn’t possible you’ll be expected to repay any loan payments (including accrued interest) made on your behalf to the college or training organisation during your course. You would only repay when your income is more than £21,000.

What happens if I can’t repay the entire loan?
You’ll only ever have to make repayments in line with your income if you earn more than £21,000. Any loan balances which remain after 30 years will be written off.

What if I declare bankruptcy?
Loans are excluded from your bankruptcy debts. This means that during and upon discharge from bankruptcy you remain liable to repay this loan.

What happens when I retire?
Loans repayments aren’t taken from Pension Income, so if you retire and are paid a pension then you will only repay if you have other taxable income that is above £21,000.

What happens when I die?
If you die then your loan will be written off.

If I move to another country following my course and my income is more than £21,000 do I still have to repay the loan?
Yes. If you go abroad we’ll make arrangements with you to collect repayments while you’re outside of the UK tax system. Your repayment threshold may vary according to price level indices for that country. You’ll be required to pay a fixed instalment to be calculated by SLC.

For further guidance, click here or contact us.